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Capital Expenditure

About Capital Expenditure

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What is Capital Expenditure

Capital expenditure is the money spent by the government on the development of machinery, equipment, building, health facilities, education, etc. It also includes the expenditure incurred on acquiring fixed assets like land and investment by the government that gives profits or dividend in future. 

The Budget estimate of the government's capital expenditure for the year 2020-21 was Rs 1,084,748 crore. The revised estimates of capital expenditure for the 2019-20 Budget came at Rs 1,059,472 crore, while the actuals for the 2018-19 Budget stood at Rs 915,670 crore.
 
Understanding capital expenditure
 
Capital spending is associated with investment or development spending, where expenditure has benefits extending years into the future. Capital expenditure includes money spent on the following:
  • Acquiring fixed and intangible assets
  • Upgrading an existing asset
  • Repairing an existing asset
  • Repayment of loan
Why is capital expenditure important?
 
Capital expenditure, which leads to the creation of assets are long-term in nature and allow the economy to generate revenue for many years by adding or improving production facilities and boosting operational efficiency. It also increases labour participation, takes stock of the economy and raises its capacity to produce more in future.
 
Along with the creation of assets, repayment of loan is also capital expenditure, as it reduces liability.
 
However, the government has to be cautious with the expenditure. In the financial year 2019-20, capital expenditure was 14.2 per cent of Budget Estimates. The government had to cut public spending sharply towards the end of the financial year in order that the deficit target could be met. Total expenditure fell by 0.3 percentage points in 2018-19 over 2017-18. This includes a 0.4 percentage point slash in revenue expenditure and 0.1 percentage point hike in capital expenditure.
 
How is capital expenditure different from revenue expenditure?
 
Unlike capital expenditure, which creates assets for the future, revenue expenditure is one that neither creates assets nor reduces any liability of the government. Salaries of employees, interest payment on past debt, subsidies, pension, etc, fall under the category of revenue expenditure. It is recurring in nature.
 

Latest Updates on Capital Expenditure

More than 145 projects costing Rs 100 crore under implementation by govt oil and gas firms

Updated On: 21 Dec 2024 | 11:32 AM IST

The government's capital expenditure increased from over Rs 5 lakh crore in 2021-22 to Rs 11.11 lakh crore in 2024-25

Updated On: 13 Dec 2024 | 3:58 PM IST

Apart from the fresh issue, the initial public offering (IPO) comprised an offer for sale of 1.01 crore equity shares by promoter Ajanma Holdings Private Limited

Updated On: 11 Dec 2024 | 5:47 PM IST

New plan aims to expand financial powers, and level the playing field with private operators

Updated On: 21 Nov 2024 | 11:30 PM IST

Patterns of capital expenditure have a bearing on economic growth. With their huge spending power, states have as big a role in economic development as the Union government

Updated On: 12 Nov 2024 | 11:13 PM IST

Analysts say the weaker spending is one of the reasons for a recent slowdown in India's high frequency economic indicators

Updated On: 12 Nov 2024 | 2:41 PM IST

The Centre's capex, through which it builds physical infrastructure, reached Rs 4.1 trillion or 37.3 per cent of the annual target in the first five months of FY25

Updated On: 11 Nov 2024 | 11:40 PM IST

The estimated revenue deficit stands at Rs 34,743 crore (2.12 per cent of the GSDP), while the fiscal deficit is estimated at Rs 68,743 crore (4.19 per cent of the GSDP)

Updated On: 11 Nov 2024 | 5:13 PM IST

In a meeting with Revenue Secretary Sanjay Malhotra, CII urged the government to increase the capex by 25 per cent over 2024-25 (BE) with a sharp focus on infrastructure related to rural areas

Updated On: 07 Nov 2024 | 9:26 PM IST

Nothing illustrates that challenge better than the Rs 47 trillion ($559 billion) corporate bond market. It's one of the world's smallest as a percentage of gross domestic product, at just 16 per cent

Updated On: 18 Oct 2024 | 2:27 PM IST

Capital expenditures across 18 states declined by 6% year-on-year between April and August in FY25, totalling Rs 1.67 trillion, down from Rs 1.78 trillion during the same period the previous year

Updated On: 14 Oct 2024 | 11:31 AM IST

But project completions slightly lower than in March quarter

Updated On: 02 Oct 2024 | 12:18 AM IST

PMEA Solar IPO: The funds raised through the fresh issue will be allocated towards capital expenditure and debt repayment

Updated On: 17 Sep 2024 | 11:59 AM IST

Transfers to states for capex also slowed to 12 per cent of the budget estimate for the same period, compared to 24 per cent in the corresponding period last year

Updated On: 11 Sep 2024 | 11:44 PM IST

The region is expected to clock a growth of 7% in FY25 but it's dependent on Central government grants

Updated On: 11 Sep 2024 | 1:10 PM IST

According to the statement, the expansion will increase the overall capacity of Jaigarh Port to 70 MTPA from the current 55 MTPA and Dharamtar Port to 55 MTPA from 34 MTPA at present

Updated On: 09 Sep 2024 | 5:06 PM IST

The growth slowed to a five-quarter low of 6.7 per cent year-on-year (Y-o-Y) in the April-June quarter

Updated On: 05 Sep 2024 | 11:29 PM IST

But the region spends a considerably higher amount on generating assets relative to its economic size compared to the average seen in other states

Updated On: 18 Aug 2024 | 11:36 PM IST

The fiscal deficit for FY25 is expected to come at 3 per cent as against the budget target of 2.5 per cent, India Ratings and Research said in a report

Updated On: 12 Aug 2024 | 10:49 PM IST

Professor Krishnamurthy Subramanian said that the removal of Angel Tax would be significant for India's startup ecosystem and encourage investments from outside

Updated On: 30 Jul 2024 | 12:37 PM IST